Beyond the Grid Fund for Zambia

Summary

Off-grid clean energy solutions offer a reliable, clean, affordable, and quick-to-deploy alternative to grid electricity, and people are willing to pay for them. However, companies selling these solutions face many challenges establishing themselves in markets like Zambia, due to a lack of investor confidence, a lack of market intelligence, a lack of an enabling regulatory environment and a high poverty rate.

Funded by Sweden, and designed by Sida and REEEP, the Beyond the Grid Fund for Zambia (BGFZ) tackles these challenges by providing results-based financing to de-risk companies’ entry into the Zambian market. To do this, the project works with the Zambian government and other stakeholders to build a more off-grid business-friendly regulatory environment.

Under its first funding round, BGFZ contracted four companies: VITALITE Zambia, Fenix International, Emerging Cooking Solutions and Standard Microgrid to deliver 300,000 off-grid electricity connections by 2021. After 25 months of operation, over 145,000 connections have been deployed, bringing clean energy access to over 750,000 people across Zambia.

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Key Facts

  • Launched in July 2017, the Beyond the Grid Fund for Zambia (BGFZ) intends to bring clean, affordable off-grid energy services to 306,000 households, businesses and institutions, or 1.6 million people, by 2021.
  • As of September 2019, the contracted companies have connected over 145,000 households, translating to 750,000 people in all provinces of Zambia. They are on track to reach their goal of 1.6 million people well ahead of schedule.
  • Beyond the Grid Fund for Zambia’s (BGFZ) 145,000 connections represent 3.4MW of capacity and have led to a CO2e emissions avoidance of 358 tonnes per year.
  • In July 2017, the four contracted companies employed 79 full-time staff and 94 agents in Zambia. Since the launch of BGFZ, they have hired an additional 301 employees and 1204 commission-based agents. Around 20% of these agents are women.

The Problem

Access to modern energy is a precondition for prosperity growth, yet 69% of Zambians (around 11.8 million people) still lack this. Extending the grid to rural areas, where 96% of people lack electricity access, is unfeasibly expensive and would take decades.

Off-grid clean energy solutions offer a reliable, clean, affordable and quick-to-deploy alternative to grid electricity, and people are willing to pay for them. However, companies selling these solutions face many challenges establishing themselves in markets like Zambia, due to a lack of investor confidence, a lack of market intelligence, a lack of an enabling regulatory environment and a high poverty rate.

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The Solution

The Beyond the Grid Fund for Zambia tackles these challenges by providing results-based financing to de-risk companies’ entry into or expansion in Zambia, and working with the Zambian government and other stakeholders to build a more off-grid, business-friendly regulatory environment. In return, the companies adhere to stringent quality and warranty requirements and share data on their work, providing BGFZ with crucial market intelligence that can serve to further de-risk the market for investors.

The Fund delivers, in effect, a public good by supporting the provision of reliable, affordable, high-quality energy services to a certain number of people over a period of time. The technology is available, the potential impact is immense and market demand is great, but due to the circumstances described above, a purely commercial market is currently unable to meet this demand. BGFZ helps create that market environment.

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Helping the Planet

Energy access is a widely accepted precondition to prosperity growth. With around 11 million Zambians still lacking energy access, now is a crucial time for the country to embark on a path of low-carbon rather than fossil fuel-based electrification and development.

BGFZ assists the Zambian Government to achieve this, by kick-starting a thriving market for off-grid clean energy solutions and working with the government to build an enabling environment for this market. Thus far, the clean energy services sold by the companies contracted under BGFZ have displaced over 374,558 candles and kerosene lamps, whereas the cookstoves sold by the companies have allowed people to move away from cooking on firewood and thereby helping reduce deforestation.

Helping People

The main benefits of the energy services provided through BGFZ, according to customers, were:

  • Easier communications via mobile phone, as they could now charge phones at home;
  • Improved access to current affairs and entertainment via radio and television; and,
  • Cleaner air indoors due to the replacement of candles with electric lighting and charcoal cooking fires with improved cookstoves.

Many customers also mentioned that, especially in households with children, electric lights are much safer to use than candles. 96% of customers said their children studied more since they acquired the connection, while 91% said their children now attend school more. Many customers also noted that they feel safer outside due to having lighting outdoors.

Besides delivering income, agents (especially women) spoke of their positions bringing them more respect in their communities, as they earn recognition as entrepreneurs and educators who teach their neighbours about the benefits of clean energy.

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Spillover Effect

The new Beyond the Grid Fund for Africa will aim to replicate the Beyond the Grid Fund for Zambia's approach in Burkina Faso, Liberia and Mozambique. Funded by Sida, managed by NEFCO as Facility Manager and implemented by REEEP, this expanded programme aims to bring clean, affordable off-grid energy access to at least 5 million people over the next six years.

New market-scoping studies aim to confirm the feasibility and inform the development of financing rounds, helping the Beyond the Grid Fund for Africa tailor their approach to match each country's unique market conditions and most pressing needs. However, the basis of the Beyond the Grid Fund for Africa’s approach, a results-based financing mechanism to incentivise companies to enter into new markets, will remain the same. Above all, BGFZ demonstrates that off-grid energy solutions can be delivered quickly and at scale, and that well-designed blended finance mechanisms have the potential to kick-start this delivery.

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